THE Royal Bank of Scotland is expected to announce 2000 job losses today in the wake of Stephen Hester's decision to stand down after five years at the helm.

It is feared that while the cuts will be spread across the world, job numbers in the City will be badly hit as the global investment arm is reduced from 11,000 to 9000 employees.

A total of 40,000 jobs have already been axed at the bank over the past five years under Hester's leadership.

RBS shares plunged five per cent today as the City reacted badly to the departure of the chief executive.

Uncertainty about the future of the 81per cent taxpayer-backed bank saw its price plunge 17.5p to 308.1p as analysts at Shore Capital downgraded the stock to a "sell" rating.

Gary Greenwood of Shore Capital said: "Overall, we think this announcement increases the uncertainty around the shares and potentially delays further any return of the bank to private ownership."

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Hester is to leave later this year and will receive 12 months' pay and benefits worth £1.6 million and the potential for a £4million shares windfall from a long-term incentive scheme. He will receive no bonus for 2013.

A fall in the RBS share price pushes it further away from the break-even value of around 500p which would enable the Government to sell.

There may be suspicions that Hester's departure will also increase the likelihood of the company being split between a good bank and bad bank, as is expected to be recommended by the Commission on Banking Standards.

Greenwood said: "Such a scenario may require the bank to be fully nationalised before the good bank can be subsequently privatised, a scenario that may not be in the short-term interests of existing minority shareholders."

Announcing his departure last night, Hester said: "We are now in a position where the Government can begin to prepare for privatising RBS.

RBS chief Stephen Hester

"While leading that process would be the end of an incredible chapter for me, ideally for the company it should be led by someone at the beginning of their journey."

He admitted having "some human regrets" about not completing the bank's transition back to private markets.

Last night former City minister Lord Myners claimed that pressure from the Government on Hester had made his position "close to impossible".

He told BBC2's Newsnight: "He's made it very clear he didn't really want to go now. He's going because the board has said he should go and I think they are doing the bidding of George Osborne.

"George Osborne has been increasingly at odds with Stephen Hester over the management of this bank."

However the Chancellor publicly paid tribute to the departing bank chief, saying he ought to be commended for "having brought RBS back from the brink" following its taxpayer bailout at the height of the financial crisis.

He said: "When Stephen Hester took on the job at RBS in 2008 it was a bust bank with a broken culture and posed a huge risk to financial stability. RBS today is safer, stronger and better able to support its customers."

He added that Hester had "made an important contribution to Britain's recovery from the financial crisis".

Hester told reporters it had been the board's choice for him to make way for someone new to lead the bank through privatisation and that he had been prepared to carry on.

He said he was "co-operating amicably and will stick around as long as they need me" before going on holiday.